Surviving the cost-of-living crisis
The world, and South Africa in particular, seems to bounce from one disaster to the next at the moment. There was COVID, then the conflict in Eastern Europe, and more recently the war in the Middle East – all of which have had a significant impact on our local economy.
All of these global issues are further exacerbated by local challenges where we contend with loadshedding, the poor performance of state-owned enterprises, ever-increasing fuel costs, a weak rand, corruption and so the list goes on.
By definition, we face a cost-of-living crisis, with the expenses for necessary basic needs such as housing, healthcare, education and daily essentials increasing at a faster rate than people’s incomes. This crisis has been aggravated by a poorly performing economy, where inflation, stagnant wages and rising costs of essential goods and services have created financial challenges for individuals and families.
The imbalance between rising costs and limited income puts a strain on individuals and families, making it difficult to afford basic necessities and maintain a decent standard of living.
The cost-of-living crisis directly affects employees’ financial well-being in several ways:
- Savings
The increase in prices of essential goods and services consumes a larger portion of employees’ income, leaving less money for savings, discretionary spending or investments. This leads to financial stress, debt accumulation and a reduced ability to handle unexpected expenses.
- Financial security
Moreover, the cost-of-living crisis can impact employees’ overall quality of life. For instance, if housing costs rise significantly, employees may have to spend a larger portion of their income on rent or mortgage payments, leaving less money for other needs like healthcare, education or leisure activities. This can lead to a reduced sense of financial security and can negatively impact mental and physical well-being.
As an employer, you can play a crucial role in helping your employees navigate the cost-of-living crisis. Here are a few points that employers can consider:
- Working from home
Offering your employees the option to work from home or remotely will reduce commuting costs such as transportation expenses, and the need for expensive work attire. This can provide some relief to employees struggling with the high cost of living.
- Work/life balance
Develop a culture that supports a healthy work/life balance. By offering flexible working hours, paid time off and supportive policies, employers can assist in alleviating stress and allow employees to be in a better state of mind to manage their personal finances.
- Counselling
Consider offering financial counselling services or programmes that will educate employees in improving their financial literacy, guide them in managing their budgets effectively and assist them in planning for their futures. These services can provide guidance on saving, investing and debt management.
- Competitive compensation and benefits
In order to improve staff retention rates and staff morale, which will lead to improved productivity, employers should offer competitive salaries and benefits packages to ensure employees can meet their basic needs. This is not a handout, but should be based on regular salary reviews that can lead to performance-based raises that will help alleviate financial strain.
- Facilitate employee development
Offer opportunities for skill development and career advancement so that employees are empowered to increase their earning potential and, consequently, better cope with the cost-of-living crisis.
The challenge is that the financial crisis that affects employees is also faced by employers, whose margins might have shrunk in the face of ever-increasing input costs. That means the solutions must be based on improved productivity for the employer if they are to fund competitive compensation and benefits if these solutions are to be sustainable.
Research shows a direct correlation between employee morale and profitability. A high staff morale will lead to lower staff turnover rates, thereby reducing recruitment and training costs. Improved staff morale increases productivity and improves customer service, which will drive sales and impact directly on the bottom line. In addition, an organisation with a high staff morale will benefit from fewer work hours lost to unscheduled days off.
What seems to set South Africa aside is our resilience and the ability to find innovative solutions to the challenges that confront us daily. We remain optimistic and often see opportunities in the challenges we face. As an employer, put yourself in the shoes of your employee – and with some ‘out of the box’ thinking, there are bound to be solutions to seeing your business and staff through these tough times.